Middletown-Wausau Depart?

 

Wausau in Harrodsburg invested $220 Mm, or 2/3rd's of the SunCoke investment, in Harrodsburg, Ky in 2011, to ALSO produce parent paper. Presently, Wausau ships its product to Harrodsburg as well.

 

Someone posted Middletown walked from the opportunity for this expansion a few months ago. With the added capitalization, and the end product being shipped out of Harrodsburg, and parent tissue in bulk now also being produced in Harrodsburg, did Middletown put itself in a position in 3-4 years, all tissue made by Wausau will be made and shipped from Harrodsburg, when they might have had that capacity, jobs, and tax revenue, in Middletown in 2011---with $220 Mm invested or thereabouts---to leave Middletown in a matter of a few years?

 

AK Steel wanted SunCoke, for electricity. It produces much of its own raw product. It buys its raw product for manufacturing at the lowest possible price, in the futures Mercantile market. Why would not Wausau also want to consolidate all production in Harrodsburg, and use Middletown for limited backup in years to come, or shut it down completely now that Harrodsburg has capacity to do what Middletown provides, with added value add in also taking parent bulk and turning it into a refined product?

 

This seems to be a possibility, and when I read the Journal article, the bell went off that a Wausau insider had refenced a golden opportunity the city missed because it was too focused on C State. From a pure operational efficiency standpoint, Harrodsburg for this business unit, is the better leveraged facility, and Wausau Middletown, in time, could be trouble---dimisnished capacity or closed.

 

On face, it seems a compelling economic development case could have been made to Wausau in 2011 to consolidate all operations in Middletown, after the initial $30 Mm capital investment in 2009. That seems to be a logical plan in 2009, and now there is the redundant and expanded plant in Harrodsburg.

 

The tax rate in Harrodsburg is .45% vs Middletown's 1.75% for employees. Could this be the next West Chester type move?

 

Something to think about, and what an opportunity to have at least made a play at Wausau to bring it all to Middletown. But, maybe that would have hurt the profile, and negatively impacted the % of college grads in the city vs non grads, the FORBES reference. Or as the Wausau insider said over the summer, was the city focused on C State, they let Wausau walk when Wausau was trying to sell the deal for expansion.

 

Maybe they will in a few years, with the same capacity down at Harrodsburg, and the machinery to do the finished product Middletown doesn't have, just bulk. Although only a few hours away, transport and logistics and minor laobor cost differences, contribute mightedly to the bottom-line in a commodity business which is what the tissues industry to be. Do they ship the product to Harrodsburg by railcar, or interstate? If by freeway, diesel costs and consolidation would be beneficial to consolidate at the Hrrodsburg location through pure economies of scale and scope.  

 

Just a thought and interesting point to bring up after reading the article in the MJ and looking into the strategic operational business crystal ball for Wausau.

 

I do not have a Chem Eng degree in Paper Pulp Technology and have no inside knowledge of what has taken place, or not taken place. Maybe it makes perfect sense to have two sites in a commodity business, two hrs apart, making the same bulk product.

 

But, depending on what the business tax was, with the employee tax at 1/3 Middletown's rate, Harrodsburg would be looking attractive after the depreciation writeoff on capitalization in Middletown. And to me, this seemed like a logical economical development opportunity to have vigorously pursued.

 

It probably never will happen in 100 years, Wausau would leave Middletown, businesses just don't get up and leave without business reason and giving notice. And, Middletown's magical water containing the naturally high starch like compound that keeps ink from absorbing through the paper, is still a competitive advantage in the paper industry. Oh....its not anymore, with the technology that starches water. That was a 100 years ago, and why paper plants located besides the canal and river.

Harrodsburg is surrounded by horse farms, but can make Wausau paper just fine.